Embattled defence giant BAE Systems is facing calls from major shareholders for top bosses to step down following its failed attempt to merge with EADS.

A group of investors - including BAE's largest shareholder Invesco Perpetual - has written to the board demanding the resignation of chairman Dick Olver and senior independent director Sir Peter Mason, as well as an overhaul of strategy at the group.

The letter has not been made public, but it is understood the shareholders - together holding around 18 per cent of shares in BAE - claim the abandoned £28bn merger with EADS has caused "significant damage" to the company.

ShareSoc, a group that represents private investors, also stepped up pressure on BAE's board by calling for the resignation of Mr Olver and chief executive Ian King, saying the deal was "misconceived from the beginning".

BAE and EADS were forced to scrap the tie-up earlier this month after political wrangling scuppered their plans.

The merger would have created the world's biggest defence and aerospace group, with combined sales of around £60bn.